I. Zapatrina,Chairman of the Board of

Ukrainian Public-Private Partnership Development Support Center,doctor of economic sciences

Experience and perspectives of implementation of state-private

partnership (SPP) projects in housing and communal sector

. . ,И В Запатрина Председатель Правления

Украинского центра содействия - развитию публично частного

,партнерства. .докт экон наук

Опыт и перспективы реализации проектов государственно-частного партнерства в

жилищно-коммунальном хозяйстве

State-private partnership in the world, 2010

SPP: objective, instruments, principles

Objective – satisfaction of interests of the society, implementation of projects of social importance, increasing of the efficiency of public management system

Instruments of achieving the objective – attraction of financial resources, intellectual potential, experience, competence and technologies of private sector by the public sector.

Principles: Trust, observance of obligations Diversification of risks Consolidation of finances, competence, intellectual

potential, technologies

Current opportunities on implementation of infrastructure

projects

Infrastructure project

Budget Credits of IFI SPP

-Budget load

-Limited number of projects

- Uncertainty in stable, rhythmical financing

- Absence of stimulus of efficient project management

- Long period of preparation and signing of agreements

- Budget guaranties

- insufficient qualification of local personnel (projects preparation, negotiations, projects implementation)

- Decreasing of the budget load and tariffs

-Increasing of number of investment projects to be implemented

- Attraction of new technologies, experience and knowledge

- Employment increasing

What SPP could bring?

1) Attraction of financial resources, experience, technologies

2) Optimization of budget expenditures for infrastructure

3) Renewal of infrastructure, decreasing of logistics expenditures of business (34% in cost – Peruу, 10% - USA)

4) Increasing of availability, quality and reliability of services

5) Employment increasing, internal market development

6) Speed up of economic growth

Direct effect

Indirect effect Total

Power generation capacity per worker

0,07 0,02 0,09

Effect on GDP growth of a 1% increase in infrastructure assets (percent)

Source: J.L.Guasch “Granting and Renegotiating Infrastructure Concession”, WBI Development Studies, 2004

7) Assistance in economic reforms

Barriers for implementation of infrastructure SPP projects at the

example of Latin America

1. Regulatory risks and their influence on the capital cost:

Increasing of capital attraction costs by 2-6% in certain countries;

Increasing of capital attraction costs by 5%

Tariffs increasing by 20%

Источник: J.L.Guasch “Granting and Renegotiating Infrastructure Concession”, WBI Development Studies, 2004

Barriers for implementation of infrastructure SPP projects at the

example of Latin America

2. Law qualification of public sector

Total Energy Transport Water and sanitation

Renegotiated contracts, %

30 9,7 54,7 74,4

Average time to renegotiate since award, years

2,2 3,1 1,6

1000 contracts, 1980-2000Source: J.L.Guasch “Granting and Renegotiating Infrastructure Concession”, WBI Development Studies, 2004

Readiness of public sector to SPP

Sector Both Government and operator

Government Operator

All sectors 13 26 61

Water and sanitation

10 24 66

Transport 16 27 57

Initiators of renegotiations

Renegotiation outcome % of renegotiated contracts

Delays on investment obligation targets 69

Reduction of investment obligations 62

Tariff increases 62

Some of the renegotiation outcomes

Source: J.L.Guasch “Granting and Renegotiating Infrastructure Concession”, WBI Development Studies, 2004

Incidence of renegotiated concessions

Feature % of renegotiation

Lowest tariff 60

Investment requirements 70

Performance indicators 18

Regulatory body in existence 17

Regulatory body not in existence 61

Regulatory framework embedded in law 17

Regulatory framework embedded in resolution 28

Regulatory framework embedded in contract 40

Source: J.L.Guasch “Granting and Renegotiating Infrastructure Concession”, WBI Development Studies, 2004

Barriers for implementation of infrastructure SPP projects at the

example of Latin America

1. Political instability (change of priorities, review of economic course)

2. Underdevelopment of institutional environment and low quality of institutes

3. Unreadiness of public authority to adequate reaction on aggressive private operators

4. Speeding up of GPP initiation process and their contractual mounting

5. Negative attitude of population to the private sector

6. Too high expectations related to SPP

Lessons for Ukraine1. Creation of conditions for SPP (reforms, system

modernization of legislation, strict observance of laws and agreements)

2. Development of institutional environment (quality of institutes, science, self-regulated organizations)

3. To hurry slowly (to start with small pilot projects – housing and communal sector, untraditional energy sector)

4. Formation of trust, understanding and mutual responsibility in relations «society – state – private business»

Concept of GPP development in housing and communal sector

Tasks:1.Creation of conditions for GPP development in

housing and communal sector (modernization of legislation, development of state regulation system, justification and ability to forecast the tariffs).

2.Development of new models and mechanisms o private sector attraction to housing and communal sector .

3. Determination of ways and directions of budget support as an element of SPP stimulation in housing and communal sector and the criteria of providing such support.

4.Widening of positive experience of GPPP mechanisms application in housing and communal sector.

5. Determination of stages, principles and peculiarities of introduction of GPPP mechanisms in housing and communal sector of Ukraine.

Risks in implementation of SPP projects in housing and communal

sector1. Imperfect legislation (taxation, tariffs, controlling bodies,

non-transparency, etc.)

2. Lack of proper institutional infrastructure (preparation, selection, monitoring of GPP projects)

3. Insufficient qualification of public authorities, loss of institutional memory

4. Political instability, lack of continuity5. Lack of experience in implementation of GPPP projects 6. Negative attitude of the society to the private business7. Overexpectations of municipalities and the state regarding

private partners8. Decentralization of water supply and sanitation sector and

heat supply sector9. High risks for officials related to decision making, non-

adequate remuneration for the qualified activity

Encouraging factors1. Interest of the state and municipalities to SPP because of

lack of budget financing2. The law on National regulation commission at the

communal services market3. Experience of formation of investment projects pool in

the framework of the World Bank project (Ministry of housing and communal services)

4. Interest of IFI to crediting of energy saving projects (EIB, IBRD, EBRD, Swiss initiative, Fund of clear technologies)

5. Experience of regional companies establishment (Water of Donbass)

6. Concept documents (law on SPP, concept of state regulation, concept of SPP in housing and communal sector, program of reforming of housing and communal sector, draft laws in field of housing and communal services)

7. Existence of positive and negative examples of SPP8. High potential on implementation of SPP projects (waste

water treatment, replacement of pumps, accounting …), influence of situation in the country on ecological situation in the neighboring countries (general water resources)

15

What could be expected by implementing SPPP projects in housing and communal

sector?

1. Introduction of the best experience, new technologies

2. Attraction of financial resources (own and loaned) for modernization of infrastructure

3. Overcoming fragmentation of enterprises of heat and water supply, efficiency increasing

4. Avoiding populism regarding housing and communal sector. Formation of «lobbyists» of reforms

5. Increasing of general level of professionalism in infrastructure enterprises management due to operators competition

6. Quick and adequate reaction on economy’s demands, technological, social and ecological challenges

Key factors of SPP development in housing and

communal sector1. Qualification of public sector

2. Institutionalization of SPPP market

3. Systematic qualified work on legislation improvement

4. Establishment of national regulation commission and ensuring of professional regulation

5. Introduction of nondiscriminatory transparent procedures

6. Professinal and responsible dialogue with the society

7. Partnership with science

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